Looking for a cut-rate location for that new plant? The Southeast remains the cheapest part of the United States for plastics processing, according to a new study.
The study compares the cost of doing business in the United States and Canada with other developed countries, but does not look at the cost of locating in developing countries like China.
Still, against some of its biggest global competitors, the study from consulting firm KPMG suggests that the U.S. plastics industry is starting to regain some competitiveness against other developed economies, in large part because the U.S. dollar has fallen.
``In 2002, we were going around talking about how the U.S. dollar is going through the ceiling and how uncompetitive it made the U.S.,'' said Stuart MacKay, one of the study's authors. ``In 2004, we're telling the opposite story.''
The study, Competitive Alternatives: The CEO's Guide to International Business Costs, also said that Canada remains a relative bargain, and said on average that Canada is 6.4 percent cheaper for plastics processing than the United States.
Canada's advantage has shrunk somewhat, however, as the Canadian dollar has gotten stronger, the study's authors said.
The report was heavily promoted by the Canadian government and partially funded by economic development agencies there and in eight other countries. The Canadian government was one of five ``gold sponsors'' of the report.
The study looked at operations ranging from manufacturing to software to call centers. For plastics, it compared costs for a hypothetical 100,000-square-foot processing operation that employs 90 and generates $14.2 million in sales.
The United States ranked sixth out of 11 countries studied for plastics product manufacturing. Australia and Canada were cheapest, while Germany and Japan were the most expensive among the major industrial nations.
Short-term changes in a country's position are largely driven by changes in currency value, said Glen Mair, the second author of the study. Other changes can have an impact, though. MacKay said Canada's competitiveness against the United States is helped because the country admits more immigrants, as a percentage of population, than the United States.
The report said the United States ranked sixth in plastics and seventh overall in manufacturing, out of 11, based on exchange rates in late 2003. If current exchange rates were used, the United States would jump to third place, at the top of a pack of countries that are all within two or three percentage points of each other, MacKay said.
KPMG has done the study every two years since 1994, and has seen the U.S. position improve since 2002.
``The U.S. has recovered a lot of its cost competitiveness,'' MacKay said. ``If anything, we expect that the next time we do this, the U.S. will be even stronger.''
The report does not compare cost with developing countries, particularly China, that have attracted a lot of attention from manufacturers. A report from the National Association of Manufacturers in December said that China's average manufacturing costs were about one-seventh that of the United States.
That NAM report argued that U.S. manufacturers have a 22 percent cost penalty because of things like higher corporate taxes and health-care costs. Although the KPMG report also indicates that the United States has a relatively high corporate tax rate, it offers a more nuanced picture of health care.
The KPMG report said that U.S. plastics companies are about in the middle on benefit costs, lower than France, Germany and Italy, but higher than Canada and Australia. The report said that since 1999, European countries have reduced requirements for benefit plans, which have cut costs.
The report also said that the United States has a larger gap than most countries between the pay of production workers and management and technical personnel.
While the high pay for U.S. executives and technical personnel, relative to most other countries, helps the United States to attract top talent, it also makes it less cost competitive for high-skill operations like research and development centers, the report said.
Beyond countrywide comparisons, the report looks at costs in specific cities, to compare, say, London to Manchester in the United Kingdom, or Greenville, S.C., to Buffalo to Toronto, for operating a plastics plant. The most expensive city in North America was San Jose, Calif., while the cheapest big city was Montreal.
Mair said the regional results in North America were about what he expected. In United States, the Southeast was cheaper than the Northeast. The Midwest generally showed costs at the national average, while the Pacific Coast was higher cost.
MacKay and Mair are president and director, respectively, of MMK Consulting Inc., in Vancouver, British Columbia. While the report has ranked Canada the most competitive of the G-7 countries for five consecutive editions, MacKay defended the conclusions, and noted that the report is reviewed and published by KPMG's New York unit.